2014 (5) TMI 116 - AT - Income Tax

Validity of admission of fresh evidence Held that - The AO issued questionnaire to the assessee on 03.06.2010 which was not responded to - further opportunities were given to the assessee which were not availed of and these resulted in passing of the order u/s 144/147 - Relying upon ITO, Ward-25(4), New Delhi vs Mrs. Pushplata Paliwal, Najafgarh, New Delhi 2014 (4) TMI 813 - ITAT DELHI - The arguments of the revenue that the finding would not be relevant in the year under consideration as it pertains to the facts in 2006-07 assessment years on consideration of the specific facts mentioned in the assessment order namely June 2010 makes it fully applicable as no doubt the assessment year is 2006-07 the relevant dates in the re-opening make a mention of January 2010 and June 2010 - the hearings were fixed in 2010 for assessment year 2006-07 - the facts that the illness of the very same accountant in the case of a family member of the assessee in the order pertaining to 2008-08 Assessment Year cannot be brushed aside as irrelevant and it further fortifies the view of the CIT(A) in the present proceedings as such his action in admitting fresh evidence cannot be faulted with and the same is upheld Decided against Revenue. Remand for re-consideration of additional evidences seek - Denial of opportunity of holistic examination Held that - It is a matter of record that fresh evidence has been confronted to the AO by the CIT(A) as per the requirements under law - It is also evidenced by the order itself that after receiving the objections of the AO who opposed the admission of fresh evidence, the CIT(A) exercising the powers vested in him overruled the objections of the AO and held that the assessee was prevented by a sufficient cause in placing the evidence before the AO - The neurological illness of a chronic diabetic person who was acting as ITP/ Accountant for the assessee and its family members was accepted as a sufficient cause - there was no merit in accepting the request for restoring the issue yet again to the AO for his consideration - the relevant documents have been looked into by the CIT(A) and on being satisfied by the correctness of the claim deletion has been ordered - The reasoning of the CIT(A) on examination cannot be faulted with and it is not a case that deletion has been ordered merely because no negative comment is made by the AO. The CIT(A) has gone on to examine these evidences himself and only thereafter on satisfying himself on the basis of the documents qua the depreciation on car or the interest income by way of documents that amounts borrowed from the banks against FDRs has been utilized for giving loans on which interest has been earned and thereafter a finding arrived at that there was a direct nexus with expenditure of interest paid on his borrowing from FDRs - Similarly the investment in property supported by receipt of award of compensation by various members of Mahendra Pal Paliwal HUF and Mahendra Pal Paliwal himself alongwith evidences of agricultural income in the year under consideration wherein such income was being claimed over the years - in the absence of any cogent argument in impeaching the authenticity of the documents relied upon the request for remand merely for the sake of asking cannot be acceded to - the request made whimsically if granted would amount to abuse of the procedures which cannot be allowed Decided against Revenue.

Issues Involved:

1. Deletion of addition on account of car depreciation.
2. Deletion of addition on account of disallowance of interest paid.
3. Deletion of addition on account of unexplained investment in property.
4. Treatment of income as agricultural income.
5. Acceptance of submissions and self-serving documents by the assessee.
6. Request to set aside the CIT(A)'s order and restore the matter to the AO for re-examination.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Car Depreciation:

The Revenue challenged the deletion of Rs. 75,000/- made by the AO on account of car depreciation, arguing that the CIT(A) violated Rule 46A by admitting additional evidence not submitted during the assessment proceedings. The assessee provided a ledger account and RC showing the car was registered on 28th September 1999, supporting the claim of depreciation. The CIT(A) admitted the evidence, and the ITAT upheld this decision, finding the documents credible and unassailed by the Revenue.

2. Deletion of Addition on Account of Disallowance of Interest Paid:

The AO disallowed Rs. 3,47,428/- claimed as interest paid due to lack of evidence. The assessee provided details showing the interest was paid on overdrafts against fixed deposits used for giving loans, earning interest. The CIT(A) accepted this evidence, directing the AO to allow the interest paid as a legitimate expenditure. The ITAT upheld this decision, noting the direct nexus between the interest earned and paid, and the Revenue's failure to rebut the evidence.

3. Deletion of Addition on Account of Unexplained Investment in Property:

The AO added Rs. 1,08,42,500/- as unexplained investment in property. The assessee explained the source of funds, including loans from Mahender Pal Paliwal (HUF) and compensation received from land acquisition. The CIT(A) admitted the evidence, finding the investment and its sources adequately explained. The ITAT upheld the deletion, noting the detailed documentation and lack of rebuttal from the Revenue.

4. Treatment of Income as Agricultural Income:

The AO treated Rs. 95,000/- as income from other sources due to lack of evidence. The assessee provided documents showing ownership of agricultural land and regular agricultural income. The CIT(A) accepted this evidence, directing the AO to treat the amount as agricultural income. The ITAT upheld this decision, emphasizing consistency in the AO's approach and the sufficiency of the evidence provided.

5. Acceptance of Submissions and Self-Serving Documents by the Assessee:

The Revenue argued that the CIT(A) accepted the assessee's submissions without proper examination. The ITAT found that the CIT(A) had duly considered the evidence, obtained remand reports, and provided the AO with opportunities to examine the evidence. The ITAT rejected the Revenue's claim, noting the AO's failure to address the evidence substantively.

6. Request to Set Aside the CIT(A)'s Order and Restore the Matter to the AO for Re-Examination:

The Revenue requested the ITAT to set aside the CIT(A)'s order and restore the matter to the AO for re-examination. The ITAT rejected this request, finding that the CIT(A) had followed due process, admitted the evidence correctly, and provided the AO with opportunities to examine the evidence. The ITAT emphasized that the AO's failure to substantively address the evidence did not warrant a remand.

Conclusion:

The ITAT dismissed the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s order. The ITAT found that the CIT(A) had correctly admitted additional evidence, provided the AO with opportunities to examine it, and made well-reasoned decisions based on the evidence. The ITAT emphasized the importance of due process and the need for substantive examination of evidence by the AO.

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